photo of desert tortoise tagged with a radio transmitter at the Ivanpah solar farm site: Todd Woody

In Yale Environment 360 on Wednesday, I interview John Woolard, chief executive of BrightSource Energy, the California solar developer that has begun construction of the first large-scale solar thermal power plant to be built in the United States in two decades:

Today, California Gov. Arnold Schwarzenegger, Interior Secretary Ken Salazar, and other dignitaries gathered in the Mojave Desert to officially break ground on BrightSource Energy’s Ivanpah Solar Electric Generating System, the first large-scale solar thermal power plant to be built in the United States in nearly two decades.

BrightSource is one of a half-dozen big solar farms, with a combined electricity-generating capacity of 2,829 megawatts, licensed by the California Energy Commission over the past two months. By year’s end, California and federal regulators expect to approve additional projects that will produce a total of 4,143 megawatts. At peak output, that’s the equivalent of several nuclear power plants and more than seven times the solar capacity installed in the United States last year.

The approval of the projects comes after years of environmental review and controversies over the installations’ impact on water, wildlife, and fragile desert landscapes. The power plants licensed so far will cover some 39 square miles of desert land with a variety of new and old solar thermal technologies. Unlike rooftop photovoltaic panels that directly convert sunlight into electricity, solar thermal uses the sun to heat liquids to create steam that drives electricity-generating industrial turbines.

BrightSource’s 370-megawatt Ivanpah project, located just over the California border, 40 miles southwest of Las Vegas, is the world’s largest solar-thermal power plant project currently under construction. The company, led by CEO John Woolard, received a $1.37 billion loan guarantee from the United States Department of Energy to build the project, which will deploy 347,000 large mirrors that will surround three towers on 3,500 acres of federal land. The mirrors will focus the sun on a water-filled boiler that sits atop the tower to create high-temperature, high-pressure steam.

Woolard, 45, came to BrightSource as chief executive in 2004 after co-founding Silicon Energy, an energy efficiency software company, and stints at California utility PG&E, the Lawrence Berkeley National Laboratory, and VantagePoint Venture Partners, a leading Silicon Valley green tech venture capital firm. He sat down with Yale Environment 360 contributor Todd Woody at BrightSource’s Oakland, Calif., headquarters to talk about the future of Big Solar and the challenges the industry faces — from a woefully inadequate electricity grid to the imperative of minimizing water use — as multibillion-dollar projects finally begin to become a reality.

Yale Environment 360: Are we witnessing the birth of a major new solar industry in the United States?

John Woolard: I hope. The number I always go back to is that we have done 74,000 permits for oil and gas in the last 20 years and we finally have five or six for solar. That’s a good step forward. The agencies are learning how to permit, they’re learning how to move forward. It’s great for the industry and we can finally get some size and consequence.

e360: As the photovoltaic industry increasingly becomes dominated by overseas companies in China and elsewhere, does the sheer scale of these solar thermal projects in the U.S. give the country the opportunity to become the technological and market leader?

Woolard: Oh, yeah. Solar thermal is very different from [photovoltaic technology]. The power has different characteristics and is more reliable. They’re almost apples and oranges. Solar thermal has got very interesting We don’t have a quantity and energy problem; It’s a collection and distribution problem.” attributes and characteristics that make it unique.

In the U.S. we’re lucky. The southwestern U.S. has high desert, which means it’s closer to the sun, less atmosphere to go through. It’s the best solar resource anywhere, outside the Anaconda Desert in Chile or a few places. Harnessing that resource effectively is the most important thing. So we don’t have a quantity and energy problem; it’s a collection and distribution problem.

e360: BrightSource’s Ivanpah project is not only the first large-scale solar thermal project to break ground, it is the first to deploy a new power tower technology. Why is that significant?

Woolard: Our team was part of building older trough plants and you learn a lot. If you take a power tower, you get higher temperatures and pressures. That gives you higher thermo-to-electrical conversion efficiency. Think of that as more efficiency, less waste, lower cost. Because of that, you need fewer mirrors, less solar field, and you have a more efficient design.

The other gets down to how you actually build on the land. If you take the older trough designs or anything with a lot of mirrors, [it] would degrade the land. It’s more damaging from a soil and runoff perspective.

The big [problem] is water. What is the world going to look like over the next 20, 30, 40 years? Water in the desert is going to become a much more challenging proposition. So we’ve gotten water usage down to a minimum — the lowest of anybody in the world, basically.

photo: BrightSource Energy

In last Thursday’s New York Times, I wrote about French industrial conglomerate Alstom’s $55 million investment in BrightSource Energy, a California-based solar power plant builder:

Alstom, the French energy giant, has taken a $55 million stake in BrightSource Energy, a solar power plant builder backed by Google, Morgan Stanley and other investors.

The investment is part of a $150 million round raised by BrightSource in one of the biggest renewable energy deals of the year. The California State Teachers Retirement System also joined the latest funding round as did the existing investors VantagePoint Venture Partners, Morgan Stanley and Draper Fisher Jurvetson.

Based in Oakland, Calif., BrightSource has now raised more than $300 million. Alstom becomes one of the startup’s largest shareholders and will take a seat on the board, according to John Woolard, BrightSource’s chief executive. The French company makes turbines and other power systems for fossil fuel, nuclear and hydro power plants and operates a division that builds high-speed trains.

BrightSource has signed contacts to build solar thermal power plants in California that would generate some 2,600 megawatts. In February, the company obtained a $1.37 billion loan guarantee from the federal government to help finance the construction of its first project, a 392-megawatt power plant to be built in the Southern California desert by Bechtel.

Mr. Woolard said Alstom would help the company as it sought to develop more efficient solar power plants.

photo: Ausra

The promise and peril of large-scale renewable energy was on display Thursday as California’s first solar power plant of the 21st century went online near Bakersfield. Under blue skies, Governor Arnold Schwarzenegger and other politicians heralded the five-megawatt Ausra solar station as the vanguard of a new era of alternative energy that would combat the effects of climate change while building a green economy.

Then the CEO of one of the nation’s largest utilities stepped up to the podium and delivered a reality check. “As we all know the capital markets are in disarray,” said PG&E chief Peter Darbee, whose utility has a contract to buy 177 megawatts of electricity from Ausra. “They’re down 40%. The capital markets are going to distinguish between high-risk projects and low-risk projects and the high-risk projects are not going to get financed in the future.”

But he added, “PG&E stands ready to take on the challenge of financing renewables.”

The utility may just have to.

At the solar industry’s big annual conference in San Diego last week, renewable energy executives were euphoric over Congress’ 11th-hour passage this month of an eight-year investment tax credit that would allow big solar power plants to get up and running, eventually allowing for economies of scale crucial to driving down the price of green electricity. Then a dark clouded drifted over the sun-splashed proceedings in the form of three somber-suited men bearing ominous PowerPoint presentations.

The message from Wall Street: The credit crunch will wallop big solar plant projects that need billions of dollars in financing to get built.

Here’s why. It gets a bit arcane but bear with the wombat. The renewable energy legislation passed as part of the financial bailout package allows solar companies to take a 30% tax credit on the cost of building a power plant. Now most of these companies are startups and have no way to monetize, as they say on the Street and in Silicon Valley, those tax credits as they’re not profitable. Instead, a solar company must essentially trade the tax credits to a firm that can use them in exchange for cash to finance construction.

So investors form something called a tax equity partnership, in which they agree to finance, say, a solar power plant in exchange for the tax credits generated by the project. The problem, according Tim Howell, managing director of renewable energy for GE (GE) Energy Financial Services, is that investors’ appetite for tax equity partnerships has taken a nose dive just as the market will be flooded with solar tax credits from a growing number of projects currently being licensed. For instance, he said, 1,000 megawatts of solar projects would generate $1.5 billion in tax credits.

That means there has to be enough investment dollars – or “capacity” in Wall Street lingo – available to buy those tax credits from the solar power companies. “Competition for tax capacity, which is a scarce resource in tough financial times, is a problem we have to solve,” Howell told a packed ballroom in San Diego.

John Eber, managing director of JPMorgan Capital (JPM), flashed a PowerPoint that showed the total value of the tax equity market at $15 billion last year with 40% going to renewable energy projects, mainly wind. Now that investment banks-which put together the partnerships and sometimes invested their own capital-are all but an extinct species on Wall Street, only an estimated $875 million will be available for all solar projects in 2008. In contrast, he noted, just the solar power plant projects already announced would need between $6 billion and $8.5 billion in tax equity funding.

“Tax equity is becoming increasingly hard to raise for renewable energy projects,” said Keith Martin, a project finance attorney at the Washington firm Chadbourne & Parke. “Several large institutional investors who put money into renewable energy deals in the last three years have dropped out of the market.”

In conversations Green Wombat has had with solar power plant executives over the past couple of weeks, they acknowledge that financing will be much harder to come by but they’re hardly ready to throw in the towel.

“There’s probably a gigawatt of press releases and 200 megawatt of plants that acutally will go live in 2010,” says John Woolard, CEO of Oakland-based BrightSource Energy, which has a contract with PG&E to deliver up to 900 megawatts of electricity.

His point: Despite gigawatts of signed utility deals, only a few power plants will actually be built in the next couple of years when financing is expected to be the toughest to obtain. “In 2011, it’s reasonable that 500 to 600 megawatts could happen,” he says. “Those aren’t big numbers for the tax equity market, but if you believe everything that’s been announced is going to be built, then it is a big market.”

California utilities, however, are counting on that big market to meet a state mandate to obtain 20% of their electricity from renewable sources by 2010 with a 33% target for 2020. PG&E (PCG), for instance, has signed 20-year power purchase agreements for more than 2.5 gigawatts of solar electricity.

When Congress extended the solar investment tax credit it also lifted a ban on utilities claiming the tax subsidy. Hence PG&E chief Peter Darbee’s statement Thursday that his utility would be willing to make sure its projects get funded by using the company’s considerable capital clout.

“We certainly could look at potentially funding or investing in renewable projects,” PG&E senior vice president Greg Pruett told Green Wombat Thursday. While he said PG&E has no specific projects in mind, it might consider financing construction of solar power plants through a tax equity partnership or a direct investment.

“Say we have a solar thermal company and they have a proven technology and they have done a demonstration plant, but because of the markets they can’t get financing,” says Pruett. “We might consider investing so they can build the plant and get it online.”

He says it’s less likely that PG&E would get into the solar construction business itself.

While it’s anyone’s guess how the markets will shake out by the time solar companies start making the rounds in New York, it’s clear that a shakeup in the nascent solar power plant business is in the offing.

About Green Wombat

Green Wombat is written by
Todd Woody, a veteran environmental journalist based in California who writes for The New York Times, the Los Angeles Times, Grist and Yale e360. He's one of the few people on the planet who have held a northern hairy-nosed wombat in the wild.

Todd formerly was a senior editor at Fortune magazine, an assistant managing editor at Business 2.0 magazine and the business editor of the San Jose Mercury News.